Hong Kong: China’s Haier Group agreed to buy General Electric’s appliance business for $5.4 billion in the country’s biggest acquisition of an overseas electronics company.
The group’s Qingdao Haier signed an agreement with GE and the transaction, which will be paid in cash, is targeted to close in mid-2016, according to a statement. While the boards of GE and Haier have approved the deal, it’s still subject to shareholder and regulatory approval, it said.
Buying a century-old business that makes $8,500 refrigerators from the likes of GE would underscore the rise of a Chinese company once known for making cheap fridges for college dormitories. It also highlights Haier’s global ambitions as the acquisition would help the company expand in the U.S., one the markets it’s trying to focus on besides Europe and Japan.
“It may be a step for the Chinese company to build up an international network, while its overseas exposure now is still small,” Andrew Song, an analyst in Guotai Junan Securities, before the announcement. “It’s also likely that they will have more synergy as Haier is developing smart appliances.”
If completed, the size of the deal would make it the largest Chinese purchase of an electronics business overseas, surpassing state-backed Tsinghua Holdings’s plans for a $3.8 billion investment in Western Digital announced last year and Lenovo’s $2.8 billion acquisition of Motorola Mobility in 2014, according to data.
GE was seeking another suitor for the unit after an agreement with Electrolux collapsed following opposition from the US Justice Department. The business drew offers from suitors including China’s Midea Group, people with knowledge of the matter said in January.
Haier’s purchase price is $2 billion more than the $3.3 billion Electrolux had agreed to pay for the business. The Chinese company said it paid a premium for GE’s long history, brand value as well as its supply chains. The deal will also help it tap the strong consumer spending in the US and its advanced technology.
GE Appliances will continue to be headquartered in Louisville in Kentucky and run by its current management team. Shanghai-listed Qingdao Haier, whose shares have been halted since October 19, will continue to be suspended on January 18.
The deal, which will be funded through the company’s capital and loans, will need anti-trust approval from authorities in US, Mexico, Canada and Colombia.
Haier has used international acquisitions in the past to achieve quick expansion and to consolidate its overseas resources. The last major overseas purchase was completed in 2012 when it bought the control of New Zealand’s Fisher & Paykel Appliances for about NZ$742 million ($478 million). It also took over part of Sanyo Electric’s washing machine and refrigerator businesses from Panasonic in March to expand its presence in Southeast Asia.
Midea is China’s biggest manufacturer of appliances, with a 17.1 per cent share of the country’s market in 2015, followed by Qingdao Haier with 7.9 per cent, Euromonitor International data show. Haier had a 1.1 per cent share of the US appliance market last year, according to Euromonitor.
GE and Haier also announced on Friday they will cooperate in industrial internet, healthcare and advanced manufacturing. Both companies will also work together to develop and grow affordable consumer health initiatives in China, according to the statement.
Hong Kong-listed Haier Electronics was increasing capital spending last year as it seeks to capture a greater share of the country’s e-commerce sales and develop more Web- connected appliances users can control with their smartphones, Chairman Zhou Yun Jie has said in an interview.
The company has already rolled out smart appliances such as heaters you can turn on with your mobile phone, and washing machines which adjust their cleaning functions according to clothing load. It showcased its latest technology at the International Consumer Electronics Show in Las Vegas this month.